Posted
by
Hemos
on Monday June 19, 2006 @10:40AM
from the gettin'-out dept.

rmunaval writes "BusinessWeek reports an interesting article on why Apple might have backed out from India. The prime reason being, India has grown at a much more rapid rate than expected and is no longer the cheap destination for the companies. It grew at an astonishing rate of 9.3% last quarter."

They were paid a living wage (or something close to it). The only difference is that a living wage in Cupertino, CA is WAY higher than one in Calcutta or Bangledesh. Heck, the living wage in Cupertio is WAY higher than one in Kansas City, MO or De Moins, IO.

You wouldn't believe how much extra housing costs on Io once you figure in the extra rad shielding and periodic cleaning of the sulfur gutters. Volcano insurance isn't even obtainable at a reasonable price; everyone just does without.

With rising affluence, what people consider a living wage also rises much faster than subsidence level wages. The wage for the average day laborer might only have gone up a bit, but what middle class workers such as programmers or engineers would like to earn is probably rising much faster. For them, a living wave now probably includes being able to buy a cell phone, maybe a scooter or car, a bigger apartment, a few nights on the town,... And these things are likely not that much cheaper than in the US or Europe because they cater to a relatively affluent group of people.Some of my Indian (in the US) coworkers joked that the rents for a/c apartments with working plumbing and other amenities in Mumbay were actually higher than what they paid in a mid-size college town in the US. Yes, you could rent a carboard shack for $5/month, but nobody who can afford not to would.

India is a REAL free market (outside the social Castes, but they're not legal anymore, kinda like discrimination isn't legal in the US anynmore) and they are starting to catch up with the US standard.. the joys of schooling in the USA then going home to being dirt poor don't last long. The only reason China is still cheap is the govt controlled labor market over there. (Work or be shot! and forget about Unions, funny hun) There was a front page article in the Wall Street Journal last week about how housing prices in some big chineese cities (not Hong Kong!) are outstripping the pay of even the people with masters and Phd degrees! And the Local govts are complicit with developers to sell off the public housing driving the costs higher. In "communist" China!!! Doesn't sound very communist to me..

The problem with this is that we're running out of areas that have decent education standards, easy access to raw supplies, and, perhaps most importantly, are stable yet have low wages/cost of living. India was fairly unusual in that they had decent universities/colleges(though not enough of them) churning out qualified graduates, a large labor pool, stability, and a cheap cost of living/wage range that encouraged importation of work.

Areas like Nigeria haven't solved these problems yet, thus raising the costs of locating there, even if their labor is dirt cheap. When you have to import the machines, supplies, and labor to build the factory and trainers to teach them how to operate the equipment, costs rise. It'll be a while before they have enough people skilled enough to replace indian programmers.

Not that I object to businesses building factories there, as providing jobs, income, and training are some of the best ways to improve the above. People with paying jobs generally don't have much free time available to go play rebel.

If I remember right, the cost of living in India is still something like a tenth that of the USA. A meal that would be ten bucks here costs a buck there. Now admitably this is partially due to an average quality of life loss, but I've heard of a number of retirees on fixed incomes moving there because it costs half as much to live there as they're accustomed.

The cost of living and the wage are only one factor of the cost of an ousourced worker.

You have to add the cost of duplicating power infrastructure because too many companies have moved in and the utility grid cannot cope. Current brownout+blackout rate is 20%+ during daytime and growing.

You have to add the exorbitant communication costs which will only grow up due to basic supply and demand laws. The fiber under the Gulf is still the same, there is no new coming up and demand has grown several times a year. The Eastern route is not looking any better because there India competes with the growing demand from China and other countries. 256Kbit there will buy you several E1s in the UK or the US (at the same contention ratio).

You have to add.. add.. add...

At the end of the adding all the numbers a worker in India will come up to less then US or EU costs in terms of salary and considerably more as far as infrastructure is concerned. From there on the overall numbers depend on how the work is organised, but I am not surprised at a company pulling out from India. There are plenty of other places around the world with comparable salary rates and considerably better infrastructure.

In a lot of the developing world, they are skipping conventional and expensive and now old-fashioned ast century tech infrastructure roll-out and going to the next generation tech, decentralised (and alternative energy, solar, etc) electric power and wireless networks instead of fixed wires. Here is an article on what India is doing to bring electricity to the 1/2 billion people that don't have it yet.http://www.dawn.com/2006/06/14/int6.htm [dawn.com]

As far as generation the "hug the trees alternative energy" stuff is very nice for villages with minimal consumption in the middle of nowhere.

It is not suitable for the real stuff. All big outsourcing shops in India are forced to have UPS capacity sufficient to handle all of their computer systems including desktops and not just portions of the datacenter like in the US or Europe. This amounts to be a parallel power grid. In most cases this hits the worst sour spot of power generation - mid-size from col

The cost of living and the wage are only one factor of the cost of an ousourced worker.

This is a very important point.

We have a lot of people in India doing contract stuff for us where I work. The price for the contractors is relatively low, but there is a *huge* infrastructure cost required to let them do the work. There's the data connection costs that you mention, but also things like VPN gear, terminal servers, MS CALs (our enterprise agreement only covers employees, not contractors), plus all of the staff work here to ensure that everything can be done reasonably securely.

That's just the concrete costs. There are additional ones that are harder to measure. Things like the potential costs related to misuse of our data by people in a foreign country, or the costs of supporting applications that may have been written by a completely different team or outsourcing company.

I have seen some good work come from the contractors, but IMO they don't provide any savings worth the effort of sending the work to another country. It seems mostly like another big corporation Monopoly money game where they make it look like saving money by transferring the cost to another division.

i was in India this april, and took my family out for dinner, the day before i left for US to an upscale restaurant. for a group of 10 people, i paid around 900 Rupees, which came to $19, the same that i spent last night when i went out to eat here in US.
It is not right that the quality of life in India is not as good as here. i.e., if you earn in US and spend it in India it is great. but if you earn in India, then that meal we had was a luxury. it is very complicated.
the hype about these high paying so

Funny, back when there was so much lather over outsourcing everything but the CEO to India, a few folk mentioned that this might happen and were replied to that with 2 billion people it won't happen in our lifetimes. Hope you are all doing ok!

While I can't claim to have predicted that this would happen so soon, I will say that I saw it coming.

Part of what happened that made this happen sooner is that the Indian quality of life, bolstered by all sorts of outside companies outsourcing there and pouring money and jobs into their economy, rose. This of course becomes a positive cycle, where the newly wealthy* start demanding more**.

This sucks up potential labor far faster than simply looking at the unemployment/agricultural worker numbers.

We're seeing the results now. India's currency is gaining strength, the dollar is loosing strength. Soon it'll no longer be as economical to outsource to asian countries(China will take longer). Soon it'll make more sense to outsource from expensive american cities to inexpensive smaller cities, larger towns, or downright rural locations within the United States. Arkansas costs half as much to live in than Hawaii.

*relativly of course. They might still be 'poor' by 1st world standards, but they're no longer 'dirt poor'** Services like telephones, internet, more frequent hair cuts, eating out, things like bigger, better constructed homes, vehicles, etc...

Soon it'll make more sense to outsource from expensive american cities to inexpensive smaller cities, larger towns, or downright rural locations within the United States. Arkansas costs half as much to live in than Hawaii.

It's happening now. I live in Indianapolis, and there are already three companies here who are getting on that trend. One thing they point out is that prices for land and housing are 1/2 to 1/3 of what they are in, say, Chicago, and that while wages here aren't THAT much lower, they are lower. The labor laws are also pretty much the same as elsewhere in the US, plus there are nice little junkets like Colts games, the Indy 500, etc. Indy isn't the only place seeing this, either.

Of course, over time, as wages adjust,... but hey, that's just how the world is.

What's interesting to note here is that the Indian government played a big role in the quality of life expansion.

Take a look at Mexico in contrast. 2 years ago, illegal immigrants sent around 12 billion dollars back home. This was more than twice the highest foreign investment in Mexico. Last year, they sent back an estimated 17 billion. This was the second highest income for the entire country of Mexico; mexican oil brought in the highest income, but not much higher.* Yet Mexico remains dirt poor, despite the huge influx of cash they're receiving from El Norte and their illegal migrant workers. Ultimately, Mexico's government is to blame for the consistent failure to raise standards of living.

It really makes you wonder just how much damage corruption does to a floundering Third World nation. It also makes the point that throwing money at a problem won't even begin to solve it most of the time.

India was colonized by England. They brought English to India. Most Americans speak English. This helps India. India also has a good education system, for those that can afford it. Most can't, but there are one billion+ people in India. If 10% of the population of India gets a formal education they already have more educated people than the ENTIRE population of Mexico. So, 100 million English speaking college graduates gives them a bit of an advantage over Mexico. On top of this, Mexico suffers from corruption, no doubt, and the bigger problem of a culture that puts very little emphasis on education. Both corruption and the mentality that education is not important are cultural issues.. not gov't inflicted..

So ya, money won't solve the problem of poverty in Mexico. Gov't "shake ups" won't either. Things won't change until Mexicans stop paying bribes and realize that their kids need to be capable of doing something useful in order to make a decent salary. People get paid big bucks to do things that produce even bigger bucks. If your child drops out at age 16, can barely read or write and has no other skill set, how are they ever going to make it big?

You write that as if it's a joke. Sub-Saharan Africa is a big emerging supplier of tech labor, in the position that India was 20 years ago. We're already seeing major efforts in Nigeria, don't think for a minute that much of the rest of Africa won't follow.

What are the major requirements for locations to which you want to outsource tech jobs?

- A stable power grid (if it's not there, build a small one yourself)- An oversupply of labor with high population growth (to keep that oversupply rolling)- A sufficient percentage of English-speaking workers.

The rest is training and, for large companies, will pay off quickly. I'm sure I've left off a couple items, but African countries, Indonesia and other PacRim countries, and SE Asia are where tech labor outsourcing is heading next.

This is a positive for these countries (standard of living will increase) and, in the long run, a positive for the US and other western powers (greater influence in those areas, long-term economic benefits).

You write that as if it's a joke. Sub-Saharan Africa is a big emerging supplier of tech labor, in the position that India was 20 years ago. We're already seeing major efforts in Nigeria, don't think for a minute that much of the rest of Africa won't follow.

It's already well underway; I get emails from nice people in Nigeria all the time offering to share their money with me. They must be working pretty hard coding all those emails!

Its kind of hard to get a corporation to invest a lot of money in a country where the government is not all that stable, revolution is a strong possibility, warlords rule the countryside, and people kill each other because they believe the person put a spell on them. This describes a large chunk of Africa. There may be cheap labor and eager workers, but until the basic issues are taken care of, a prosperous economy will still be years away.

Sure. I'd never say there wasn't. You simply can't find a government free of corruption. But the guy I replied to made it sound like the US was the A-number-one place to come to if you want a smooth ride for your company, when it in fact is not. Environmental and safety regulations here may not be as strong as Europe, but it orders of magnitude stronger than (almost) anywhere in Asia, Africa or South America, and I only say 'almost' to avoid places lik

Zimbabwe was quite a developed economy, until the glorious leader there went on a rampage of forced wealth redistribution and wrecked the economy. I understand that the supposed rationale was the righting of wrongs committed during colonial and post-colonial rule by the white "overclass", but the practical result of the half-assed way this was carried out (squatters, mob rule) meant that it was an utter disaster. I feel sorry for the average Zimbabwean, regardless of race or origin, because it isn't pretty for them right now.

Even more depressing, South Africa, after a relatively smooth transition from apartheid, is slowly devolving into the same kind of typically stupid/corrupt sub-Saharan political incompetence, with ANC one-party rule and a stupid AIDS-denying, Mugabe-kissup (Mbeki) on the throne.

I suspect all that's going to happen is that the move to India will slow, not stop. After all, if the so-called out-sourced jobs are removed from India, wages will drop, and it will become economic to move back, making use of the relatively skilled (I don't want to hear the insults, thank you. I've seen pretty bad code from all parts of the world, and consultants are by far the worst. It's not a country-thing, it's a "Do it by us or for us" thing) labour there.

This is a positive story. India's economy has clearly benefitted, and other countries are about to have their economies raised by the same process. Jobs in America have not gone noticably down (though wages have decreased in some areas.) Perhaps global trade will result in a massive decrease in global poverty in the long run, as its proponents have always argued, to much scepticism from left and right alike.

You seem to have picked zimbabwe for no reason, but I do hope you realize that until fairly recently Zimbabwe was not third world (I lived there most of my live). When I was there there were linux clubs, mac clubs.

It has a lot of coders, but most have gone to South Africa and the UK as they are paid better wages. Heck, I am in the US (but not coding, thank goodness!).

The most likely reason that comes into my mind is a power struggle of some sort between management of that company. I bet someone was sold on an idea that moving jobs to India would cut costs, but then someone else was in the opposite camp and we just saw the result of that battle. Was any manager fired from the company within the past month?

Apple is a publicly traded company and as such here's what's important to them.....

Making money for their stockholders.

That means sweatshops for iPods and doing things like heading down the dangerous path of closing off the Darwin source for development so that OSS geeks can't find a way to make OS X work on commodity boxes.

Apple is going to do what is best in their corporate interest. Surprised? Don't be. It's business

Yes, making money is obviously important, but it doesn't preclude doing the right thing.

As an example, the Fortune 500 electronics company that I work for does most of its R&D in the US, but there are also R&D centers in other countries, mostly from acquisitions. It does most of its manufacturing in the US as well, even though it could get away with doing the job much cheaper in emerging countries, particularly China, where environmental rules are pretty slack and labor costs are much lower.

We've got at least one fab in China, true, but it meets US safety and environmental standards. I'm sure that the pay is not what it is in the US, but if the pay there is like the pay here, it's above the national average for the job.

Here in the US, we regularly win awards for going well above and beyond governmental requirements for environmental safety. We've got a fairly green operation, as much as possible, considering what it takes to do what we do.

The company has established a well-funded charitable foundation that supports education and arts in the community and around the country - and even in the big tech downturn when we were losing billions of dollars a year, it was able to give away millions of dollars each year.

And the thing is, we're not particularly different from most other large companies. So the "make money at any cost" mantra is getting pretty tiring.

In a way US corporation going to India stimulated this growth. It is interesting to me that India has changed because of outside investment but the way they have changed has made them less appealing to those same investors.

Hey, that's capitalism. I don't know why anyone finds this mystifying; in search of a cheaper labor pool, a bunch of Western companies invested a bunch of money in a developing country. So much so that the "developing country" has developed so far that investing there just isn't the payoff it used to be. So now they're either going to look for another developing country to invest in, or decide that shifting their labor pool from country to country isn't the long-term investment benefit they thought it was g

Capitalism by definition doesn't have to have a completely unregulated marketplace. "That's capitalism" is an ampty platitude. What "that" is is a particular way of practicing capitalism that is unfair.

In the past, Presidents like Teddy Roosevelt tried to place check on corporations in order to protect our economy. Nowadays, we are seeking to tear down all these successful restrictions.

There a difference between free trade and fair trade. Exploiting economic imbalance to screw your own country's laborers is free trade, but it is not fair trade. If someone wants to outsource to the Third World, fine--but that decision should come with a tariff that makes it at least competitive to hiring workers in your own country. Otherwise, you wind up outsourcing your wealth and standard of living.

Some might say that that's a great thing to do, but I think it is each country's duty to protect its own workers. That's what we pay taxes for.

Capital can afford to move. Hell, it saves money each time it moves. Labor can't afford to move. It costs labor money when it moves. That's globalization for you. Capital increases and is free (as in freedom). Labor competes against other labor and is unfree (as in unfreedom).

The fascinating part about this is how by exploiting these people (Indians and Chinese, but also Poles or even to take older examples the Irish) we make them rich and reduce the differences between them and us. Shockingly enough, all that bad, shameful economy (can you remember of some "concious" person telling you not to buy Nike shoes because they were made in Chinese sweatshops?) did great good to them, in the middle to long term.

It can be useful to remember that the US had its share of horrid working conditions back when the industrial economy was getting going. Exploiting labor is not some new occurance brought upon by globalization. It's just a normal step on the ladder to economic growth.Not to say that it's all good. No billion dollar corporations should be making people work in unsafe conditions, regardless of what country they're in. But saying that a company is evil because they're having their good manufactured by people wo

Well, it's a lot less clear-cut than that -- not all exploitation leads to better living conditions in the future, as you may destroy all social and/or ecological infrastructure in the region. This happens more often than you think -- we just rarely hear about this, since everyone who can end up leaving the place, and those who can't just, well, die off, and nobody ever hears about destroyed villages or poisoned valleys where nobody can ever live again for 20 years.However, you are right about one thing --

This encourages governments to be efficient, but also creates a race to the bottom on standards. "Exploitation" is more complex than good/bad. Wealth is more than money. A lot of the "wealth" from "exploitation" comes for hiding real costs. Creating huge negative externalities which aren't measured and thus removed from the bottom line.

It goes to show that the markets _can_ moderate themselves and that outsourcing isn't necessarily bad in itself. It can help countries get out of poverty.IMO outsourcing only becomes immoral and akin to slavery when the jobs go to people who are kept poor by their government and we exploit this situation. When giving our business and jobs to those countries, we become in a way accomplices with the crooked governments. However, when we outsource to democracies like India that have, in spite of some problems

Is it only me that gets frustrated when my calls are piped over to India? I'm all for globalisation and outsourcing but when basic customer service suffers it serves only to frustrate customers, or me at least.I've lost count of the number of times I've literal just given up and hung up while trying to do simple tasks over the phone like notify change of address or query a bill.The 3 companies I've had particular problems with are Amex, Dell and Apple.

I never understood moving stuff like phone centres and manufacturing away from the customer-base.Sure the labour might be cheaper and all (offsetting transportation of the goods ) but you end up taking out of your control aspects that keeping it in-house provided.

After the batch of Indian call-centre workers stealing UK account details and selling them I am glad such centres are comming back home

"The turnover is high, and the competition for good people is strong."

My company is currently using Indian developers to augment our in-house staff. Every time the offshore company presents someone to us that cuts the mustard, we end up having to rotate someone else on after that person bolts for another company in India three months later. We keep getting told that demand is so high for QUALITY Indian developers that no one can keep them. They keep bouncing from outfit to outfit, getting salary bumps with each move. It's second hand information obviously, but it certainly does synch with what we've experienced.

They keep bouncing from outfit to outfit, getting salary bumps with each move.You can blame HR for this. HR needs to weed out people who have made these kinds of moves too much in favour of people with long term business relationships with their employers. Testing a person's loyalty is HUGE for HR and they do typically drop the ball on it more than they keep the ball in play.

But blame the economy too. Companies have treated employees so poorly in the past, on almost every level, that there has to be some ac

For those who haven't seen it yet, Time Magazine's cover story for this month's issue is titled: "http://www.time.com/time/magazine/article/0,9171, 1205374,00.html">India Inc. and carries quite an in-depth (IMHO) opinion of "The rise of India".

Not sure how the subscription model for time.com works, but I have been able to access all stories in the Cover article without a subscription:

There was an article [slashdot.org] on slashdot few days back, which claimed that 'Apple's iPods are made in China by women who work 15 hours/day, make $50/month, and have to pay half of that right back to the company for housing and food.' probably the reason [slashdot.org] they pulled out of India.

India is becoming expensive in some parts like Bangalore. But Pune, Hyderabad, Delhi, Trivendrum are not that expensive.

I still feel, it is not a good decision, looking at huge market (over 1 billion people) of India.

Yet he is also a tough-minded executive who knows when to cut and run. That's why Apple Computer Inc. has shelved plans to build a sprawling technical support center in Bangalore, even as IBM (IBM ) and other tech powers are ramping up.

Doesn't the part of knowing when to cut and run imply that it was the right decision? The way I've always looked at outsourcing as an engineer is that you want to have people of varying backgrounds in any large organization. I think that India and China are part of this along with the US and others. Other countries will come into the fold as well, but I think that it'll be for the better of the company to have multiple groups with different backgrounds and experiences.

Now, it sounded like this venture was purely for help desk, which I think is being performed at a commodity level nowadays (in the sense that all service seems to suck, given that good service costs money). In that case, moving to wherever it is cheapest is probably a good move. Though maybe they'll just add to the number of workers woring 15-hour days in China.

What we are at this point seeing are the first steps in a cycle of balance.

India has been in a horrible financial condition. It's got large amounts of debt and it's trying to work it's way out of them. This comes with financial assistance from the international community. You have many of these poorer nations not able to afford the subsidies anymore for farmers , which means more people migrating to the cities for the promises of these fantastic tech jobs.

Problem is the cities aren't ready to handle all these people, and the government isn't ready to handle all this displaced workforce. Result? SLUM TOWN!

Uh Oh, now the international community is on nations to provide a base level of support for their people. They don't want sweat shops and shanty towns of workers paid pennies on the dollar of what others get. India has to rely for a good deal on it's own people to solve this problem for themselves because they don't have the money to. If they want to they have to start taxing these companies more, which means.... costs go up. On an individual level? How to get out of the slum, you have to get paid more so you can afford to live there, you demand more pay.. they demand more for your contracting.. Costs rise...

Suddenly all those cost benefits from outsourcing start evaporating.

From my personal perspective.. yay. This is far more effective a way to "keep jobs here" than trying to legislate some mandate for companies to do so. In this case, the "free market economy" is actually doing it's job.

This economic phenomenon is expected and was already discussed in this fora.As the demand for the work increases, to get the best in the business, one has to pay more.Also, the overall economic indicator increases along with it comes higher land rates + higher standard of living.This makes it much more costly for the average person too, which means the average pay increases quite a bit.

Along with it comes the fast growth of the other economic indicators - more people get more vehicles etc.These things will start congesting the infrastructure, which also would act as a deterrent for new companies.

Now the option is to go to not so fancied (earlier) sites in India (or any outsourcing nation), so that you get everything cheap.Since they saw the growth of fancied sites, they also would have improved the basic infrastrcuture to make it close to them.. without the current issues. But I guess Apple execs were lazy enough to not look at the new sites and stayed with the fancied ones. -- Yep, they had to pay for that.

I guess China skipped these issues by using far-sighted (and possibly evil) government policies - ex - they forcibly decreased the standard of living in many areas - which meant you get more people coming to urban centers - which means the demand and supply chain stays the same.Also they improved the infrastructure by pouring in money for the same + they started builiding up a lot of suburbs to decrease the rising land-rates.

India is going through a tech boom similar to the U.S. tech boom in the 90's. Qualified computer-related experts are demanding higher and higher salaries and jumping to whatever company is the current high bidder. As the wages go up, the rest of India's economy booms. India is beginning to take on many of the good and bad aspects of the U.S. economy.
With most of its over 1 billion people in povberty, China can out compete India easily on wages. Training just 1% of that number with technial support produces a 10,000,000 strong workforce.
The process of U.S. jobs migrating to India will happen to Indian jobs over the next 5-10 years as China becomes the outsourcing destination of choice.

Er, not quite. India is about 15–20 years behind China, as far as the state of economic development goes, and this includes outsourcing from the West. The reason you think China is trailing India is that India's boom coincided with the IT bubble in the States, whereas China's has been ongoing for two decades longer; India's development was therefore much more visible to you in your particular (I'm assuming IT-related) industry.

Mandarin vs. Cantonese is a non issue. The only people who are able to speak Cantonese and not Mandarin are in Hong Kong (and that number is decreasing rapidly, as the importance of trade with the mainland increases) or in various isolated communities in other countries (which often speak relatively non-standard dialects of Cantonese at home, and some other more common language on the street -- for example, Toishanese in SF Chinatown.)There are many speakers of Cantonese, of course -- it's one of the major

With IBM CEO announcing $6 Billion for expansion in India [eweek.com], which also included setting up worldclass IBM Research centers, I think it was a bad move by Apple. IBM CEO & executives are much more experienced and powerful in the corporate world than Apple executives are. When Bach's player hits the road, Jobs will be forced to move Cupertino to Bangalore or he will move to Benaras;-)

...I think it was a bad move by Apple. IBM CEO & executives are much more experienced and powerful in the corporate world than Apple executives are.

Or maybe they did not feel like competing for the scarce, good programmers with IBM and a few hundred other companies. Really, there are better, cheaper places for outsourcing and outsourcing itself has significant drawbacks. As for the relative competence of IBM and Apple executives, I think you may wish to review the track records in the last 5 years.

IBM is largely a services company, always has been, and even more so now after the sale of their PC division. The vast majority of their staff are consultants for hire. For IBM it makes sense to invest in India because the Indian market for consultants is booming both because of the outsourcing craze, but also because the Indian economy is booming and homegrown IT companies are getting to the size where they're becoming a large potential market for IBM. To

How does such pathetically poor grammar routinely make it to the front page? Having technological skills is a wonderful thing for a tech site's editors, but I think/. has forgotten that editors also need to have a solid working understanding of proper grammar and sentence structure. How the hell does anyone justify hiring these people as editors?

This should have been obvious to everybody, but what happens of course is that as companies hire their workers in what are essentally third world countries and pour money into the local economy in the form of foreign capital, the local economy picks up and suddenly the price of labor in the market increases. This makes the whole outsourcing thing a bit of a rat race as everytime you find some suitable location with cheap labor and build your factory/office there, the cost of labor begins to rise until it's hardly worth the trouble of outsoucing in the first place. Then you have to look for a new place with a new supply of cheap labor to start the process all over again.

The only way to prevent this from happening is to move into countries with brutal kleptocracies that will insure that the wages you pay never stimulate the local economy too much and the strong armed government thugs keep the people from setting up any sort of fair or equitable government. Your best bet is for those countries where two ethnic minorities have been fighting for centuries over some long lost or stupid reason. The downside is that it's very hard to find suitable working conditions in those type of countries because you generally have a big security problem and basic services like power and phone can be hard to come by (and unreliable). Also, you'll have to bribe government officials like crazy to avoid having your business raided, however in the long run it'll be cheaper than paying a decent wage to the workers. If you're really commited, you can surreptitiously fund one side of the conflict and give them enough of an upper hand to overthrow whatever government the country currently has and set up your own puppet government in its place. The only problem with this is that the puppets often try to sever ties with you once they get what they want (cheap slave labor and a country to call their own).

The only way to prevent this from happening is to move into countries with brutal kleptocracies that will insure that the wages you pay never stimulate the local economy too much and the strong armed government thugs keep the people from setting up any sort of fair or equitable government.

Interesting theory, but the worst of the kleptocracies tend to have a hell of a time attracting any foreign capital or orders (Zimbabwe, Burma).

The important figure isn't the wage, it's the productivity. You might be able

First, the BW article speculates... the author doesn't really know. So was it high wages? Was it something else? "We" don't know yet.

However, there are several issues with setting up in India that probably make it less attractive for Apple.

1) Worker loyalty: while all tech workers probably seem like mercenaries these days, it is even more so in India's white hot tech areas. The workers will leave for what we, in the U.S., would consider miniscule salary differences.2) Worker training: Indian workers are often broad brush trained in "popular" technologies - finding software engineers trained in non-Windows, non-Oracle, non-SAP, or non-J2EE tech is probably much harder to find at a cost effective salary. Again, this is an issue in the U.S. too, but more pronounced in India and many other non-U.S. technology boom areas.3) Best of the best: Apple is small (workforce numbers) and tends to follow the hire the best of the best (even if they don't give them the best of the best resources to work with). Those that are really good are probably already working in the U.S., or would not find it all that hard to make it into the U.S. The number left of the best of the best in India probably aren't much cheaper these days (one would often have to be 4:1 to 8:1 cheaper to outweigh the below).4) Big costs (not just money): Apple doesn't have huge projects that require a thousand or thousands of engineers on a single project that might be able to amortize the costs/issues of temporal and geographical displacement. Apple has most of its software engineering done in Cupertino, and it would take a big shift to deal with significant outsourcing or remote development.5) Core strength: software engineering is Apple's bread and butter, it is what differentiates the hardware, it is its own profit center. Messing with this too much is not a good idea. Apple can't treat this as a commodity item on a balance sheet.6) Expansion deals went through in CA: Apple bought a large data center and has plans to build another campus in CA - and the review of those deals going through probably meant that this Indian effort doesn't make sense for Apple right now.

None of this particularly means anything with respect to India, India's tech boom, IBM in India, outsourcing to India, etc. This is merely Apple's evaluation on whether or not it makes sense for Apple. These issues have been there, will continue to be there. It is strange that Apple started and effort but then pulled out, but that is better that they are contantly critically re-evaluating rather than what we've seen from some other U.S. companies that have staked huge efforts on "hot trends" that some CIO/CFO/CEO reads in a trade mag, rather than doing true critical analysis. Going to India may make sense for lots of companies, but certainly not to the level we've seen it lately.

"miniscule" when converted to dollars maybe (and not usually) -- Companies are paying 15 to 30% increases over their previous pay plus some additional perks (Indian tax laws exempt most perks from income tax -- e.g. Car Allowance etc) for engineers/tech-support types to switch. while 25% of $20,000 p.a. may not strike you as something other than miniscule, it is 25% over the previous and it matters.
btw, the word on the street in bangalore is that Apple did indeed pull out because of cost related issues.

The article describes Jobs as "a tough-minded executive who knows when to cut and run."

What? Cutting and running is always the wrong thing to do, in all situations, under all circumstances. It is always a craven act of cowardice. Nervous-Nellyism.

A quitter never wins, and a winner never quits.

When the going gets tough, the tough get going.

Stay the course. Never give up the ship! Now matter how deep you are in the Big Muddy, the right decision is always to push on. Where would the lemmings be if they had turned back? What if Custer had chosen to retreat?

Doesn't Jobs remember the Think Different posters with the pictures of Icarus, Captain Ahab, and the Earl of Cardigan?

India is the "largest democracy in the world" but if there is social justice there, then I'm CowboyNeal and I have a date tonight.

Capitalism wants cheap labour and Western Politics is the art of smooth-talking mostly ignorant NIMBY voters. Western leaders don't have the guts to stand for and live by principles and the truth is that most of the people in the West don't have the guts either.

Just shows, how lack of proper details about a situation can manifest itself into prejudice. Caste system in India is a non-entity in the way it used to be.
The reserved castes (earlier called lower castes) now get active affirmative with as much as 70% of some colleges purely earmarked for them. Publicly distinguishing people based on caste can get you to jail
The caste system does not violate human rights, and commenting on an issue without understanding it just makes people look asinine.

the cover story of the Nat'l Geographic last year sometime disagreed with your assessment, detailing litanies of abuse from the burning of the house of an untouchable who drank from the wrong tap to throwing acid in the face of another for some social tresspass. Unfortunately, the whole article is unavailable online, but here's the teaser: http://magma.nationalgeographic.com/ngm/0306/featu re1/ [nationalgeographic.com]

Too true. If it wasn't for the activities of the various unions of computer programmers, including the infamous Federated Union of Computer programmers and Keyboardmen, and the Association of System Specialists, programming jobs wouldn't be being outsourced to India all the time. If only computer programmers were, as a group, more anti-union, and didn't keep joining trade unions at the drop of a hat, maybe some of these jobs would stay in America.

Funny... but the Apple facility in question is a tech support center, not a programming house. Phone tech support is a service job, and there are indeed plenty of American unions covering such jobs.But my point was that American unions have set a general standard for American workers, not just for their specific market segments. As long as Americans think we are the greatest people in the world and deserve twenty times the pay of other people... we shouldn't be surprised when employers decide that a little

It surprises you that money is the overriding concern? It is most likely that Apple is putting those jobs in Cupertino, CA, and the remark about efficiency is exactly that. Apple may find it more efficient to have the software engineers in Cupertino and the cost savings of going to India isn't worth it. If it is worth it, then by all means Apple should be there. Apple has outsourced much of its hardware manufacturing - it made sense to do so. Apple's management has a duty to its shareholders first and forem